Tougher law enforcement and new programs to boost homeownership, revive neighborhoods and help victims of predatory loans have struck a blow against the epidemic of property flipping that swept through Baltimore in the late 1990s, a federal task force will report Monday.
But the report, the result of two years of work by the Baltimore City Flipping and Predatory Lending Task Force, recommends that housing agencies and lawmakers at every level of government do more to combat what it calls "the pervasive and venal practice of property flipping and mortgage fraud."
Flipping refers to the quick purchase and resale of houses at hugely inflated prices. The purchasers -- typically a web of predatory brokers, lenders and appraisers -- often sell the houses to unwitting first-time homebuyers in poor, minority neighborhoods. Unable to afford the overvalued mortgages, the homebuyers quickly lose the property in foreclosure, tearing the fabric of neighborhoods.
The task force points to several encouraging signs of progress in Baltimore, including a 33 percent decrease in flipping over the past 1 1/2 years and a 36 percent decline in the number of foreclosed homes taken over by the U.S. Department of Housing and Urban Development.
HUD's collection of homes is viewed as a breeding ground for flippers, who often buy them from the agency at bargain-basement prices and then do minimal repairs before reselling them at more than double the purchase price.
Still, the task force said the private and public sectors have further to go. In particular, it said:
HUD needs better controls to ensure that its houses are sold to local families, instead of to investors looking for a quick profit.
The Federal Housing Administration, which insures some home mortgages, needs new powers to prevent foreclosures and provide financial help to victims of mortgage fraud.
The state attorney general's office should use consumer protection laws to more aggressively pursue predatory lenders and brokers.
The City Council, Maryland General Assembly and U.S. Congress must overcome industry opposition and enact new measures to protect consumers against unethical lenders.
"We need to broadly raise the ethical standards within Baltimore's housing market through aggressive code enforcement, regulatory enforcement, consumer protection cases and progressive regulation," the report says. "We also need to maintain vigilant watchdog functions in the public and private sector, to better identify housing trends, new scams, new players in the field -- and intervene earlier."
